The Securities and Exchange Commission’s Division of Corporation Finance recently issued new compliance and disclosure interpretations (C&DIs) related to so-called “Regulation A+” and Regulation Crowdfunding promulgated under the Jumpstart Our Business Startups (JOBS) Act. The C&DIs pertaining to Regulation Crowdfunding were issued on the same day as the SEC’s announcement of the adoption of technical amendments to the JOBS Act Rules, including amendments to increase the amount of money companies can raise through crowdfunding (as discussed in the April 7 edition of Corporate & Financial Weekly Digest).
The new C&DIs address the following issues (among others):
C&DI 182.16 provides that the SEC will not object to an issuer filing a Form 1-Z to suspend its Tier 2 reporting obligation after the issuer (that was not previously subject to a Tier 2 Regulation A reporting obligation) qualifies an offering statement pursuant to Tier 2 and withdraws its offering statement pursuant to Rule 259 before making any sales in that offering, even though the withdrawal occurs before the issuer has filed an annual report for the fiscal year in which the offering statement was qualified. The full text of this C&DI is available here.
In C&DI 182.17, the SEC explains that, while pursuant to paragraph (c)(1)(i) of Part F/S of Form 1-A (Regulation A offering statement), Tier 2 offerings may follow paragraphs (b)(3)-(4) of Part F/S for the age of interim financial statements, an issuer in a Tier 2 offering may also follow those paragraphs for full fiscal years. The full text of this C&DI is available here.
In C&DI 182.18, the SEC clarifies that an issuer qualifying an offering pursuant to Regulation A is not required to file a tax opinion as an exhibit to its Form 1-A, but the issuer may elect to do so as an additional exhibit pursuant to paragraph 15(b) of Item 17 of Part III of Form 1-A. The full text of this C&DI is available here.
In C&DI 182.19, the SEC indicates it would not object to an issuer with ongoing Regulation A reporting obligations not including as an exhibit to its Form 1-K an auditor’s consent to the use of an audit report for the financial statements in the issuer’s Form 1-K. The full text of this C&DI is available here.
C&DI 201.02 explains that, for purposes of Rule 201(r) (which requires that an issuer disclose any related party transaction that exceeds 5 percent of the amount raised by an issuer during the prior 12-month period in reliance on the exemption from registration provided under section 4(a)(6) of the Securities Act of 1933), the threshold for disclosure of related party transactions should be based upon the target offering amount plus any amount already raised in reliance on 4(a)(6) during the prior 12-month period. This means that, even if an issuer would be willing to accept proceeds in excess of the target offering amount for the current offering, the issuer should not include the potential proceeds in excess of the target in making the 5 percent calculation unless those amounts have already been raised. The full text of this C&DI is available here.
C&DI 202.01 clarifies that, for purposes of calculating the number of holders of record for determining whether an issuer may terminate its obligation to file reports pursuant to Rule 202(b)(2) of Regulation Crowdfunding, an issuer should count all holders of record of securities of the same class as the securities issued in the Regulation Crowdfunding offering for which the issuer has a reporting obligation. This includes, for purposes of clarity, holders of record that purchased such securities other than in the Regulation Crowdfunding offering. The full text of this C&DI is available here.